Question

Assume you are the division controller for Browning’s Cookie Company. Browning’s has introduced a new chocolate chip cookie called Full of Browning’s, and it was a success. As a result, the product manager responsible for the launch of this new cookie was promoted to division vice president and became your boss. A new product manager, Bishop, has been brought in to replace the promoted manager. Bishop notices that the Full of Browning’s cookie uses a lot of chips, which increases the cost of the cookie. As a result, Bishop has ordered that the amount of chips used in the cookies be reduced by 10%. The manager believes that a 10% reduction in chips will not adversely affect sales, but will reduce costs, and hence improve margins. The increased margins would help Bishop meet profit targets for the period. You are looking over some cost of production reports segmented by the cookie line. You notice that there is a drop in the materials cost for Full of Browning’s. On further investigation, you discover why the chip costs have declined (fewer chips). Both you and Bishop report to the division vice president, who was the original product manager for Full of Browning’s. You are trying to decide what to do, if anything.

Answer 1

This case comes from a real story. In the real story, the first reduction in chips had no impact on the marketplace. The manager was promoted, and the next manager attempted the same strategy-reduce chips by 10%. Again, it worked. The next manager did the same thing. All of a sudden, the market demand dropped for the cookie. A threshold was reached, and the cookie was in trouble in the marketplace. The current cookie was nothing like the original recipe. The cookie's integrity was slowly eroded until it wasn't “Full of Chips.” The company had no idea this was happening, since it occurred slowly over a period of many years. Now, with respect to the controller, there are a number of options.

a.     Do nothing. This is a safe strategy. It would be highly unlikely that failing to reveal this information to anybody would ever be discovered or “pinned” on you. Unfortunately, this is one of those situations where silence has very little penalty, yet speaking up entails some risk. However, silence may not be the best option.

b.    Talk to Bishop. You can have a conversation with Bishop. This is also a reasonably safe strategy and probably the best start. For example, you may discover that the reduction in chips was okayed by the vice president or that there was a market study that revealed that the market thought the cookie had too many chips. This kind of information could be discovered very easily and without any risk through a personal conversation with Bishop.

c.     Talk to the vice president. You could also go right over Bishop's head to the vice president. This strategy might label you as “not a team player,” so some care is in order here. You might get Bishop in hot water, or you may get yourself in some hot water. This is probably not the best first move. It is within Bishop's authority to make the chip decision, so you are, in a sense, second-guessing Bishop when you go to the vice president. You could be accused of being out of your expertise. After all, what do you know about chips and the marketplace?

Probably the best move is to talk to Bishop. If you discover that Bishop is acting on his own, with the primary motivation being to improve the “bottom line,” then you may need to talk to the vice president. This is a tricky situation. You would need to make your case that the reduction in chips strikes you as a short-term decision that may have transitory benefits but may be a poor long-term decision. Again, Bishop has the prerogative to make the chip decision; so in a sense, you are second-guessing Bishop. This must be done with care.